Dogecoin (DOGE-USD) was the perfect cryptocurrency for 2021. Traders gravitated to Dogecoin due to memes, Elon Musk, and a general bullish sentiment for more adventurous assets. Dogecoin doesn’t have much real-world use. For awhile, that didn’t matter. In a world where shares of companies such as GameStop (NYSE:GME), AMC Entertainment (NYSE:AMC) and the like could go to the stratosphere with little fundamental backing, Dogecoin held a lot of speculative trading appeal.

This year, however, has been a different matter. Meme stocks have given back most of their gains. And in crypto, that market has entered a dramatic downturn. Bitcoin (BTC-USD) is struggling to hold onto the $20,000 level, with its price down by well over 60% off its all-time highs. With Bitcoin down by more than half, it’s no surprise that most smaller cryptocurrencies have gotten pummeled in 2022. This has put Dogecoin in a tough spot. There was little fundamental reason to own the coin already.

Dogecoin was never primarily about the technology or its development ecosystem, but rather it was a trade around vibes and the social community. These intangible factors hold much less appeal during a bear market. And that’s especially true since the coin’s leading backer, Elon Musk, is currently distracted by other business.

The “Dogefather” Is Busy Right Now

There were many factors which led to the rise of Dogecoin. However, any discussion of Doge’s incredible run has to involve Elon Musk. Prior to 2021, the coin generally traded for less than a penny each and it was not near the top of the cryptocurrency leaderboard.

In 2021, however, Musk started tweeting frequently about Dogecoin. This gave the crypto some serious buzz. Eventually, this all led up to a Saturday Night Live appearance where Musk proclaimed himself to be “the Dogefather” and gave the meme token a massive publicity boost. The price of Dogecoin would make its all-time high of 73 cents in conjunction with this event.

Since then, Dogecoin, like cryptocurrency in general, has generally been in a downtrend. The price of Dogecoin sometimes jumps on a Musk tweet or other positive catalyst, but has been sliding overall.

And Musk in particular has been focused on other matters lately. Namely, Musk is busy with a messy acquisition offer for Twitter (NYSE:TWTR). Musk originally bid $54.20 per share for Twitter, but now appears to be angling to lower his bid. He blames spam bots for reducing the value of Twitter’s business. Twitter has responded by offering to give Musk access to Twitter’s internal data, but it remains to be seen if this will satisfy Musk’s concerns.

While it’s unclear how the Twitter drama will play out, one thing that is for certain is that as long as Musk is primarily focused on Twitter along with his businesses, such as Tesla (NASDAQ:TSLA), there is less time for memes. Speaking of Tesla, its shares have also plunged in recent weeks, putting more pressure on Musk.

Potential Benefits For Dogecoin

Dogecoin’s lack of technological development, in one sense, might be a positive for the asset now. That might sound odd, so let me explain.

The cryptocurrency community has been rocked by a series of scandals and crashes in recent weeks. Safemoon (SAFEMOON-USD) has been hit by lawsuits as investors have alleged a pump and dump scheme and missuses of funds. Prominent Safemoon investor Dave Portnoy also slammed the project’s leadership, saying he has lost nearly all his funds that he had put into Safemoon.

Then there was the shocking collapse of Terra (LUNA-USD), Luna, and the Anchor (ANC-USD) lending protocol over this past month. That’s not all. The Celsius decentralized finance (DeFi) lending platform plunged as it halted withdrawals amid a seeming liquidity squeeze. The related Celsius (CEL-USD) token has lost nearly all its value in recent months.

Against this scary backdrop for cryptocurrency, Dogecoin is something of a known commodity. It’s a meme token tied to Elon Musk and peoples’ love of dogs. Dogecoin isn’t trying to create a DeFi marketplace or become a leading non-fungible token (NFT) platform. There’s no stablecoin associated with Dogecoin that could crash overnight.

Dogecoin was initially released back in 2013. It has been through a number of crypto bear markets. Dogecoin’s strengths and weaknesses are well-known and that could be comforting in such a rapidly-shifting marketplace.

Final Verdict

Dogecoin is up against a series of headwinds right now. Crypto is in a big bear market. Dogecoin itself still has minimal real-world utility. And the bid for meme assets has largely disappeared this year. Dogecoin itself reflects that. With the price now under 6 cents each, the price of Dogecoin has slipped almost 70% so far in 2022.

Still, Dogecoin has been through major downturns before. It’s possible that this crypto winter drags on even longer and the whole space remains in a slump. But with Dogecoin, at least, there are no stablecoins, withdrawal freezes, or other such liquidity concerns to worry about. When sentiment improves, Dogecoin may rally once again. Especially once Elon Musk gets resolution on his Twitter dealings, he may start talking about Dogecoin more prominently once again.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.